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Agency to wind up seven Kanu-era banks in one year

TRUST

The bank will be the first to be wound up under the new Kenya Deposit Insurance Act (2014) that came into effect on July 1. PHOTO | FILE

Summary

  • There are in total 17 banks undergoing the liquidation with Heritage Bank (once called Export Bank of Africa) that went under on September 13, 1996, set to become the latest to be wound up.

Seven financial institutions under liquidation by the Kenya Deposit Insurance Corporation (KDIC) are likely to be wound up within the next one year, the agency said.

There are in total 17 banks undergoing the liquidation with Heritage Bank (once called Export Bank of Africa) that went under on September 13, 1996, set to become the latest to be wound up.

The bank will be the first to be wound up under the new Kenya Deposit Insurance Act (2014) that came into effect on July 1.

“The 17 are at various stages of liquidation. We have seven banks in line for winding up, where the Heritage Bank is the first one. We expect the other six to be done within the next one year,” said KDIC acting chief executive officer Aggrey Bett.

Mr Bett was, however, not willing to disclose the other six banks and neither did he give the timeframe for winding up of the remaining 10.

The liquidation process involves payment of depositors a guaranteed sum of up to the Sh100,000 insured deposits while those with balances in excess of the sum are entitled to receive liquidation dividends based on the value of recoveries and proceeds from the sale of the institution’s assets.

Once the final accounts of the affected bank are prepared, KDIC issues a public notice of intention to apply for release of the liquidator, and thereafter applies to the court for the winding-up of the institution and disposal of the records of the institution.

In a notice published in the media Thursday, KDIC gave the public a 21-day notice to inspect the receipts and payments of Heritage Bank at its offices.

“..any objection you may have to the granting of the release of the liquidator must be notified to the High Court within 21 days of September 11,” read the KDIC notice.

Since early 1990s when a raft of banks collapsed, 24 Kenyan financial institutions have been put under liquidation with seven having already been wound up.

Those wound up include Allied Credit Ltd (2007), International Finance Ltd (2007), Diners Finance Company Ltd (2008), Trade Finance Ltd (2008), Nairobi Finance Company Ltd (2010), Central Finance Kenya Ltd (2012 September), Inter African Credit Finance Ltd (2012 September).

Notable banks under liquidation include Trade Bank, Postbank Credit Ltd, Kenya Finance Bank, Euro Bank, Prudential Building Society and Trust Bank—the largest bank failure in Kenya’s history.

Under the new regulations, banks will on top of a flat fee paid as deposit insurance be required to make additional contributions to the insurance fund based on their risk perception.

Data from CBK shows protected funds were only 10 per cent of total deposits of Sh1.9 trillion last year.

The fund has also recently started going after the private wealth of directors of collapsed banks after getting orders against directors of Trust Bank and Prudential Building Society.